Although it appears as though many investors would prefer to think otherwise, I believe the oft-repeated argument that investing is somehow distinct from gambling is incorrect.

Gambling may not be an investment, but investing is certainly a form of gambling.

If you want to infuriate an investor, tell him or her that investors are gamblers. They’ll immediately offer a variety of arguments attempting to distinguish the two ventures from one another. Some of those arguments sound reasonable and it’s easy, at first glance, to accept them as proof that those who pore over stock trends to find a winning investment are different from those who pore over statistics and weather reports to find a likely football upset upon which to bet.

The arguments separating gambling from investing make it seem almost impossible to believe that the folks reading market reports looking for undervalued stocks share any commonality with the knuckleheads who are pouring cash into slot machines.

If you dig a little deeper and take the argument a little more seriously, however, you may come to the same conclusion I have. Investing is a form of gambling.

The real question is whether or not one form of gambling is better than another. I believe that traditional investment strategies, as we usually understand them, are a much better bet than those you can find in a casino. They’re both gambles, though.

Why is it important to address whether investing is gambling? There are a few reasons.

First, failing to recognize the similarities can give people a false understanding of how investment really works and the risks that are, inevitably, involved. Pretending as if an investment isn’t a gamble is nothing short of misleading.

Second, understanding that investing and gambling are close relatives gives us an opportunity to discuss why some risks are better than others. It allows us another means by which to evaluate financial risk analysis. Investors try to distinguish themselves from gamblers and they usually do so while cautioning others against the folly of believing in casino magic.

They’re right about avoiding the gaming tables if you want to make money, but making those arguments from a hypocritical stance can only undermine their effectiveness. Encouraging smart investing by being honest about why it’s a better gamble than the blackjack table makes more sense than pretending one is good and the other evil.

Third, on a personal level, I’ve always found the “investing isn’t gambling” position annoying and frustrating. I don’t think it’s intellectually honest and I’m bothered by the fact that so many people are willing to embrace the perspective uncritically.

So, here’s the plan for this series.

Tomorrow and Wednesday we’ll talk about why investing is part of the larger world of gambling. On Thursday and Friday we’ll address many of the arguments offered to distinguish gambling from investing. On Saturday, we’ll discuss why investment is a much better form of gambling than your standard casino trip. Sunday, we’ll wrap it up with a post that shows how traditional gamblers and “real” investors can actually learn from one another.

Whether you agree or disagree with the arguments presented, I do invite you to comment. I think this is an interesting topic of discussion and it seems as though there should be some defense of the “investment isn’t gambling” argument, considering its widespread popularity. I’m willing to entertain arguments and I’m always a fan of having my analysis challenged.